FOREX TRADERS

[USDollar]

Waves: Ride the Market or Ride your Emotions, You Decide
Study finds day-traders with cooler heads prevail


Ari Kiev in this NYMEX presentation (Second link from top, "Psychology of Risk") says, "When you feel trading anxiety, start the stopwatch". What he means is that emotional impulses are waves with a very short time cycle. Simply timing your emotional response (be it anger, panic, euphoria, elation, or any other "emotion") will prove it is short lived.

Knowing this, it becomes useful to recognize your particular "emotional forms" earlier and earlier in their cycle. By witnessing your impulse to display anger, dejection, euphoria, etc, you see its arrival, its peak, and its passing. You become free to choose instead to not react, clearing the way for a rational response. You begin to experience for yourself that level-headed trading has a higher probability of success.

Our intellectually focused work has literally put us "out of touch" with our feelings. Traders are from Mars! By observing how your body responds during an emotional impulsive wave event isn't touchy-feely. With focus and persistent practice, it can speed you towards your goal of being a Trader in the Zone.

"Traders with extremely intense emotions had the worst overall trading performance, researchers found. Traders with the best performance had reactions somewhere in the middle, stronger than those reporting little emotional response, but not intensely happy when their trades did well or down in the dumps when they didn't.

'Having an intermediate range of emotion response seems to be the sweet spot,' said Lo.'

Researchers also found there isn't necessarily a trading personality marked by aggressiveness, for instance. The researchers said that suggests "different personality types may be able to perform trading functions equally well after proper instruction and practice," provided they don't get too emotional about profits or losses."

As a trader, you don't need academic proof: you have lived it daily, perhaps at times even been a victim of your own emotions. Looking inward can be just as useful as charts and technique if improving your performance is what you are after.


From Ana Maria